Government decides to increase biodiesel in diesel; price at the pump should rise 2 cents – 03/17/2023 – Market

The government of President Luiz Inácio Lula da Silva (PT) increased, this Friday (17th), the mandatory percentage of blending biodiesel with diesel to 12% as of April. Today this level is at 10%.

The decision will lead to an increase of two cents in the price of diesel at the pumps next month, according to the Minister of Mines and Energy, Alexandre Silveira. At the turn of April, the product will also be pressured by the change in the ICMS collection model, which raises the tax rate.

The measure was announced by Silveira after a meeting of the National Energy Policy Council (CNPE). Lula also participated in the meeting, which was the first of the collegiate this year.

The minister tried to minimize the impact on the consumer and also said that there will be a staggering of one percentage point per year until reaching 15% in 2026.

According to the original biodiesel program schedule, this percentage was supposed to come into force in 2023, but the percentages were changed by the Jair Bolsonaro (PL) government to try to contain the escalation in fuel prices.

“Biodiesel reached 13% in the past, went back to 10% and was supposed to be at 15%, according to what was approved [anteriormente]”, Silveira told journalists in front of the ministry.

“But we carried out in-depth technical studies to prevent it from having a very serious economic impact on the price of diesel and, therefore, we came to the conclusion that the most consistent number, which has practically no impact. So, we defined that biodiesel becomes 12%, starting in April”.

The decision was unanimous regarding biodiesel, including the vote of Marina Silva (Environment).

“They [membros do CNPE] understood perfectly that it was the most coherent for the moment, considering that we always have to balance economic, social and sustainable issues, so that we don’t have a much greater gain on one side and a social loss with a strong impact on the pump”, said Silveira .

The portfolio holder also said that the government will create the Gás para Empregar program and that a working group will be formed to study it.

In addition, the government issues a provisional measure (MP) for gas, which is under analysis by the Civil House. The text allows a swap (exchange) of diesel oil, which belongs to the Union, for natural gas. “And so, increasing the condition for us to have more gas in Brazil and guarantee more energy security”, he said, without detailing how this exchange would be made.

The increase in the mixture was causing friction between the fuel sector and agricultural producers. This week, representatives of distributors, service stations and carriers released a statement asking for a review of the program.

They accuse agribusiness of taking advantage of the demand for sustainable practices to “profit more” from the sale of a product that, according to them, has caused problems in fuel pumps and engines, both for trucks and generators.

The producers, on the other hand, defend that the accusations are unfounded and that the increase in the mixture is based on studies endorsed by the government. They allege that the biodiesel program generates opportunities for small-scale agriculture and disposes of surplus soy oil and animal fat residues.

Sources in the fuel sector criticized the decision announced by the CNPE this Friday, but say that the government opted for a political solution that serves farmers without raising the percentage too much at this time.

Anfavea (National Association of Automotive Vehicle Manufacturers) said this Friday that the ANP (National Petroleum, Gas and Biofuels Agency) should soon release new specifications for the fuel that aim to eliminate engine problems.

For Abiove (Brazilian Association of Vegetable Oil Industries), the re-establishment of a schedule to increase the mixture brings predictability and legal security for investments “and definitely places Brazil on the path of world leadership in the decarbonization of the diesel cycle matrix”.

Fundamental for cargo transport in the country, diesel will also have a high tax burden in early April when the new ICMS collection model takes effect, with the rate in reais per liter and no longer a percentage of the final price.

Specialist in fuel taxation, consultant Dietmar Schupp calculates that the average rate in the country will be R$ 0.95 per liter, R$ 0.13 higher than the one in force in the first half of March.